China property jumps to top credit risk in Bank of America global survey
CHINESE real estate is now seen as the No 1 source for the next global credit event among investors surveyed by Bank of America (BOA), even as President Xi Jinping’s government rolls out stimulus measures to stabilise the world’s second-largest economy’s ailing property sector.
The ratio of investors concerned about China’s housing sector more than doubled to 33 per cent in September from 15 per cent last month, according to the latest BOA global survey of fund managers, which included 222 participants with US$616 billion in assets under management.
US or EU commercial real estate, which was seen as the top credit risk in the August poll, moved down to the second spot.
At the same time, 8 per cent of those polled named a potential Chinese real estate “bust” as the biggest tail risk, following central banks kept hawkish by high inflation, worsened geopolitics, systemic credit event, a credit crunch, global recession and an artificial-intelligence-fuelled bubble in tech.
The survey came as distressed Chinese property developers struggle to negotiate with creditors to extend repayments.
Country Garden Holdings, once the country’s largest builder, had been asking to stretch out principal payments just days after it dodged a default on US dollar securities at the last minute.
A NEWSLETTER FOR YOU
Tuesday, 12 pm
Property Insights
Get an exclusive analysis of real estate and property news in Singapore and beyond.
The deadline for votes on two of eight securities it had sought to extend was pushed back until later Tuesday (Sep 12), people familiar with the matter told Bloomberg News.
Meanwhile, a spurt of home sales in the biggest cities seems to be losing momentum less than two weeks after the authorities loosened mortgage restrictions, raising doubts over whether the steps are enough to revive the market before a crucial busy season.
Nearly 60 per cent of participants in the survey believed further support from China over the next six months will be limited to policy fine-tuning, while only 12 per cent expected a so-called fiscal “bazooka” and merely 4 per cent anticipated some big monetary stimulus. Fifteen per cent of the investors saw no meaningful measures at all.
Overall, the “avoid China” theme has become one of the biggest convictions among the surveyed investors, wrote BOA strategists led by Michael Hartnett. A net zero per cent of them now expected stronger economic growth for China in the next 12 months, a dramatic reversal from 78 per cent in February this year.
The pessimism was even worse than what was observed in the same month last year, when China was still suffering stringent Covid-19 lockdowns.
Short selling of Chinese stocks also gained momentum. “Short China equities” was picked as the most-crowded trade by 21 per cent of those in the Bank of America survey.
That marked a jump from August’s 14 per cent and was in stark contrast with what fund managers around the world saw earlier this year.
The poll was conducted from Sep 1 to Sep 7 and other findings included a rush towards the high-flying US equities and an exodus from emerging markets. BLOOMBERG
Share with us your feedback on BT's products and services
